WPP Group to acquire 24/7 Real Media

British communications services firm WPP Group beat Microsoft in securing an agreement to acquire advertising and technology firm 24/7 Real Media Inc. in an all-cash transaction valued at about $649 million.

The acquisition comes after Google's $3.1 billion intended acquisition of DoubleClick last month and Yahoo's purchase of 80 percent of online ad exchange Right Media for $680 million earlier this month.

"The recent acquisitions feel to me like more of an anticipation of a big shift in online marketing dollars, like we've been talking about for the past few years," said Shar VanBoskirk, analyst at Forrester Research Inc., Cambridge, MA.

The acquisition of 24/7 Real Media by WPP will bring together the technologies and services of both firms. Advertiser clients will now access tools to control digital media including search marketing and display advertising. Publisher clients will gain access to advertisers and ad management tools.

According to Ms. VanBoskirk, WPP sits in a different position than Google.

"WPP didn't have an ad-serving platform or a media network, so the acquisition is more of a completion of the supply chain," she said. "Google is a different player than WPP. Google has always been a technology and media company and they are used to serving ads. WPP's play is to create a more holistic way of designing and serving ads. This is a classic example of how a media company differs from an agency."

Under the terms of the agreement WPP will begin a cash tender offer for all 24/7 Real Media shares for $11.75 per share. The offer price represents a 30-percent premium over the average closing price of 24/7 Real Media's shares for the last 60 trading days. The transaction is expected to be completed in the third quarter of this year.

It could change the way that vendors develop technology.

"With the acquisition of yet another ad-serving company, the bigger media companies are concerned with their competitors having access to their most confidential data," said Dana Ghavami, CEO of CheckM8 Inc.

"I think there is another major issue for them," she said. "Most of these vendors will no longer be developing technology to benefit clients. They'll be developing technology to benefit their new parent. Larger clients that have been accustomed to getting great products and great services from these vendors, might be facing a new reality in which they have now become second-tier clients."